Sample portfolio from What Works on Wall Street, James O'Shaughnessy
Screen: PE<20, high RS over 1 year, market cap > C$225M
Data source: http://www.globeinvestor.com 21Jan00
Note: used price filter for TSE-listed common stocks >$5 and
>25% 1-yr price appreciation, then sorted by PE,
dropping all stocks on list with market cap below stated limit.
Company 1 yr Price
Symbol Name MCap PE Price % 20Jan00
1 CAM.A Canam Manac 262 6.7 48.0 7.40
2 QBR.A Quebecor 3011 7.6 46.0 46.50
3 AC Air Canada 1674 9.4 31.9 8.90
4 RCI.B Rogers Commn 13106 9.6 122.7 45.20
5 WS Wstrn Star Trck 404 10.3 43.5 28.05
6 DFS Dofasco 2449 12.4 50.5 29.80
7 LNF Leon's Furn 442 12.9 25.7 22.00
8 AGR Agra 365 13.0 39.5 12.00
9 NF Nexfor 1316 13.2 46.2 8.70
10 OCX Onex Corp. 3503 13.6 86.9 42.75
11 CRY Cryptologic 297 13.8 124.8 34.50
12 NMR Namibian Min 324 14.6 192.9 8.20
13 GIL.A Gildan Activwr 460 16.0 184.7 33.45
14 BCE BCE 86400 16.8 116.9 134.25
15 CLC Cdn Medical Lbs 409 16.9 184.0 20.45
16 DUP.A Dupont Canada 5490 18.6 31.7 59.00
17 IMS Imasco 17706 19.6 29.2 40.90
18 DHC.B Donohue Inc. 3989 19.8 50.5 29.50
Average 13.6 80.9
The list is presented in p/e order, from low to high.
Last time, the 5 stocks by lowest p/e did best (and that best was pretty darn good).
That would get you a port of Canam-Manac, Quebecor, Air Canada,
Rogers Communications, and Western Star Trucks (the sixth stock is Dosfasco).
Not bad. Note, too, that if you take Graham's suggestion
that the earnings yield from a stock should be higher than from
current bond yields, the Western Star p/e is just under that
limit (a p/e of 11, derived by current long bond yield of about 6.75 x 4/3
to give you a desired earnings yield (e/p) from stocks of 9%,
divided into one (1/9) to get the p/e). Graham used 4/3 because
he felt that an investment in stocks, being riskier than one
in bonds, should obtain a higher return.
Note that O'Shaughnessy did his 50-stock portfolios by sorting last
for relative strength. On this basis, you'd get Namibian Minerals,
Gildan Activewear, Cdn Medical Labs, Cryptologic Inc. (an Internet
gambling technology firm, I think), and Rogers Communications,
with the sixth stock being BCE.
I intend to run this one over what remains of 2000, with
probably roughly quarterly updates.
Note, too, that globeinvestor throws up errors. For example,
from the first go-round it appeared that both George Weston Ltd. (WN-T)
and TD Bank were on the list, but when I checked the
individual symbols,
they clearly weren't. I only checked those two, individually,
so there may be other data errors. The TD error appeared
to come from the data catching the US$ price of TD on the New York
Stock Exchange, which showed a higher appreciation than
TD expressed in CDN$. I don't know about the WN error.
O'Sh's research didn't find that using the large market cap stocks
for this kind of sort helped, so I haven't pulled
out those stocks. That is left as a bonus assignment
for the reader. :)
Don

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